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Evaluating Opportunities When People are Uncertainty Averse

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  • Gekker, Ruvin

    (National Universtity of Ireland, Galway)

  • Piggins, Ashley

    (National Universtity of Ireland, Galway)

Abstract

We consider the problem of ranking sets of alternatives. Standard approaches to this problem regard the addition of an alternative to a set containing one element as enhancing choice. We argue that this monotonicity axiom may not be desirable when an agent is uncertain as to the value of this additional alternative. We replace monotonicity with an uncertainty aversion axiom, and also introduce an axiom that produces lexicographic behaviour. These axioms, in conjunction with an independence axiom, enable us to prove a characterisation theorem. This theorem says that sets are ranked in terms of the number of uncertain elements that they contain, the fewer the better. This is the only ranking rule that satisfies our axioms.

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File URL: http://www.esr.ie/Vol40_1/ESRI%2040-1-5.pdf
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Bibliographic Info

Article provided by Economic and Social Studies in its journal Economic and Social Review.

Volume (Year): 40 (2009)
Issue (Month): 1 ()
Pages: 109-116

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Handle: RePEc:eso:journl:v:40:y:2009:i:1:p:109-116

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  1. Sen, Amartya, 1991. "Welfare, preference and freedom," Journal of Econometrics, Elsevier, vol. 50(1-2), pages 15-29, October.
  2. Puppe, Clemens, 1996. "An Axiomatic Approach to "Preference for Freedom of Choice"," Journal of Economic Theory, Elsevier, vol. 68(1), pages 174-199, January.
  3. Pattanaik, Prasanta K. & Xu, Yongsheng, 2000. "On diversity and freedom of choice," Mathematical Social Sciences, Elsevier, vol. 40(2), pages 123-130, September.
  4. Klaus Nehring & Clemens Puppe, . "On The Multi-Preference Approach To Evaluating Opportunities," Department of Economics 97-07, California Davis - Department of Economics.
  5. Gekker, Ruvin & van Hees, Martin, 2006. "Freedom, opportunity and uncertainty: A logical approach," Journal of Economic Theory, Elsevier, vol. 130(1), pages 246-263, September.
  6. Barbera, S. & Bossert, W. & Pattanaik, P.K., 2001. "Ranking Sets of Objects," Cahiers de recherche 2001-02, Centre interuniversitaire de recherche en ├ęconomie quantitative, CIREQ.
  7. Sebastiano Bavetta & Vitorocco Peragine, 2006. "Measuring autonomy freedom," Social Choice and Welfare, Springer, vol. 26(1), pages 31-45, January.
  8. Antonio Romero-Medina, 2001. "More on preference and freedom," Social Choice and Welfare, Springer, vol. 18(1), pages 179-191.
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